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State-Run MSTC To Launch Rs 226-Crore IPO On March 13

MSTC Ltd. will launch its three-day initial public offer on March 13 as the government plans to sell its stake in the e-commerce company.

The state-run company will sell 1.76-crore shares—or 25 percent—at Rs 121-128 apiece in an offer for sale, helping the government raise close to Rs 226 crore at the upper end, according to its red herring prospectus. The government’s stake will fall to 64.85 percent from 89.85 percent after the share sale.

The offer will be available to retail investors and employees at a discount of Rs 5.50 per share. Equirus Capital Private Ltd. is the book-running lead manager to the offer.

Incorporated in 1964, MSTC started as a trading company for importing ferrous scrap and emerged as an e-commerce service provider and trader for bulk raw material, according to its red herring prospectus. The company, which provides e-auction/e-sale and e-procurement services, got over 90 percent of its business from the government and state-controlled entities as of Sept. 30, 2018.

Bam Bahadur Singh, chairman and managing director, said the revenue from e-commerce is expected to increase at 10-15 percent each year. While the e-commerce business contributed to 7 percent of the firm’s overall sales as of Sept. 30, 2018, its trading business, which involves sourcing of raw material for end users, accounted for 81 percent.

Despite a 30 percent year-on-year increase in sales to Rs 2,265 crore in the year ended March 2018, the company reported a loss worth Rs 6.5 crore. That led to a negative return on net worth at -1.77 percent as of March 31, 2018, compared with 34.27 percent in the previous fiscal.

“A couple of our debtors have gone to the NCLT, so we had to provide for all those debts,” Singh told BloombergQuint. The company wrote off bad debt worth Rs 459 crore in 2017-18, and provided nearly Rs 222 crore for bad and doubtful debt/advances during the period, compared with Rs 24-crore write-offs and Rs 31-crore provisioning in the previous fiscal.